On 10 October, it was announced that three economists share this year’s Nobel Prize in Economic Sciences. The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel goes to Ben Bernanke, Douglas Diamond, and Philip Dybvig for research on banks and financial crises.
This year’s recipients of the Nobel Prize in Economic Sciences have significantly improved our understanding of the role of banks for our economy, in particular in connection to financial crises. Their research shows, among other things, why it is so important to avoid that banks collapse, the Royal Swedish Academy of Sciences writes in its announcement.
The right field of research
Hubert Fromlet is affiliate professor at Linnaeus University and conducts research on international economics, with focus on the Baltic Sea region and the major Asian economies, like China, India, and Japan. The winners did not come as a surprise to him.
“The avoidance of banking and financial market crises is one of the most important tasks of economic policy. Such crises can often have severe and long-lasting consequences. Therefore, it is right that these fields of research are awarded with this year’s Prize in Economic Sciences through Ben Bernanke, Douglas Diamond, and Philip Dybvig”, says Fromlet.
“Economic policy should not only be conducted for a better future, but also to ensure that major economic and financial crises can be avoided”, Fromlet continues.
Douglas Diamond has been on my list of candidates for many years, also Philip Dybvig was on it until just recently. Diamond was even on my latest list. I removed Ben Bernanke from my list after a brief period on it due to his – in my opinion – too inconsistent role as chair of the U.S. Federal Reserve during the latest global financial crisis. I thought he was too passive, above all concerning finance and banking supervision, while at the same time being too active a force for what became the globally exaggerated ‘quantitative easing’ approach”, Fromlet explains.
“My hope is that in the future, there will be an improved understanding of banking crises as well as sound regulations, not only in the so-called emerging economies, but also in China with its insufficient statistics and lack of transparency on the financial market. This year’s recipients of the Prize in Economic Sciences should lead to more reflection”, Fromlet concludes.